WORKING WITH MACROECONOMIC DATA

For data to use in these exercises, go to the Federal Reserve Bank of St. Louis FRED database at fred.stlouisfed.org.

1. Graph the main expenditure components of GDP (consumption, investment, government consumption expenditures and gross investment, exports, and imports), in real terms, since the first quarter of 1947.

2. Graph South Africa's national saving and investment as fractions of GDP from 2004 to the present. (Note that national saving is called gross saving and gross investment is called capital formation in the FRED database.) Comment on the behavior of these vari­ables. Explain how investment can exceed national saving.

3. Graph the annual CPI inflation rate and the annual GDP deflator inflation rate for Indonesia since 2000. What are the conceptual differences between these two measures of inflation? Judging from your graph, would you say that the two measures give similar or different estimates of the rate of inflation in the economy?

4. If the real interest rate were approximately constant, then in periods in which inflation is high, the nominal interest rate should be relatively high (because the nomi­nal interest rate equals the real interest rate plus the inflation rate). Using annual data since 1948, graph the three-month Treasury bill interest rate (FRED variable TB3MS, 3-Month Treasury Bill: Secondary Market Rate) and the CPI inflation rate for the U.S. economy. (Take annual averages of monthly interest rates and measure annual inflation rates as the change in the CPI from December to December.) Is it generally true that nominal interest rates rise with inflation? Does the relationship appear to be one-for-one (so that each additional per­centage point of inflation raises the nominal interest rate by one percentage point), as would be the case if the real interest rate were constant? Calculate the real interest rate and graph its behavior since 1948.

5. In theory, in the national income and product accounts, income should equal expenditures. However, when we add up income from various sources, it differs from expenditures, in part because the government statisticians are unable to count all income and all expenditures precisely. The difference between the two measures is the “statistical discrepancy." To see how important the statistical discrepancy is, plot the annualized quarterly growth rates of GDP and GDI (gross domestic income) in one graph. Over the past five years, what is the average difference in the growth rates of GDP and GDI?

6. Plot the growth rate of real GDP from 1960 to last year in three different ways: (1) annualized quarterly growth rates, (2) quarterly data using the percent change from a year ago, and (3) quarterly data using the percent change from the previous quarter. How do the three series differ? Which measure is least vol­atile? Which measure is the most volatile?